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Likviditetsstrategi decreased during October with -0.09 percent. Since year-end, the NAV per share has consequently increased by 0.73 percent. Both the corporate bond and equity markets ended the month on a negative note. For the second month in a row, spreads in the high-yield segment widened. The investment grade companies fared better with more or less unchanged spreads over the month, but with a weak ending in the last few trading days. The risk appetite was again weighed down by the increased spread of the coronavirus and new restrictions in several European countries, including Germany and France.
In the Nordic primary market, activity was somewhat lower compared with the previous month, new issues were seen mainly from a handful of Swedish real estate companies.
Halfway into the reporting season, it can be stated that most of the companies that are part of the portfolio and have presented their quarterly figures are developing well, despite in many cases challenging conditions. The insurance companies Tryg and Gjensidige are doing very well with both premium growth and solid capital adequacy. Among the more cyclically sensitive companies, Hexagon and Stolt-Nielsen can be highlighted. During the quarter, Hexagon reached its highest operating margin ever despite somewhat declining sales. Stolt-Nielsen far exceeded market expectations, thanks to good cost control, the margin increased, and the company significantly reduced its leverage ratio. The banks have also come in stronger than expected, both Nordea and DNB have reported lower credit losses than expected and show reassuring levels for capital adequacy.
Among the month's largest contributors was the credit management company B2 Holding, whose bonds rose in value after a couple of sector colleagues submitted strong quarterly reports with collections that surpassed previous forecasts and results that exceeded expectations. The quarterly report from B2 is expected during the first week of November.
On the negative side were bonds real estate companies with negative contributions from, among others, Samhällsbyggnadsbolaget i Norden and Balder. Samhällsbyggnadsbolaget reported several real estate transactions where the portfolio is refined through divestments of office properties and investments in care and nursing properties. No news was presented from Balder.
Among the fund's investments in corporate certificates, Catena and Castellum were added to the portfolio. In other respects, no major changes were made to the portfolio during the month.
Much of the focus during the month has been on the US presidential election. Election polls continue to indicate a victory for Biden, but with the 2016 election fresh in mind, markets have begun to discount a scenario without a clear winner and a more drawn-out process for appointing the next president of the United States. During the last week of October, the stock markets traded down, the S&P 500 fell by 5.6 percent, which is the worst week for the index since March.
The Corona virus has also had a negative effect on investor sentiment during the month. The spread of infection has continued to increase, and Europe has now surpassed 10 million cases. As a result, more countries are choosing to impose harsh restrictions. In Germany, bars, restaurants and recreational facilities are required to close, and the United Kingdom has chosen to shut down the country once again for a month to reduce the spread of the disease.
As expected, the European Central Bank (ECB) left both the policy rate at 0.0 percent and the quantitative easing program unchanged. The ECB also emphasized that further action could be taken towards the end of the year if economic activity in the euro area continues to slow down. According to the ECB, the GDP outcome during the fourth quarter of 2020 is estimated to be significantly lower than previous forecasts, especially if many countries continue to impose strict restrictions. Statistics from Eurostat show that GDP in the Eurozone fell by 4.3 percent in the third quarter compared with the same quarter last year. Quarter-on-quarter growth was 12.7 percent.
SCB published CPI-data for Sweden, which showed an increase of 0.4 percent in September, which was lower than expected. During the month, the Swedish Debt Office (Riksgälden) published an updated forecast of the Swedish budget balance. A deficit of SEK 256 billion for 2020 is expected, far better than the SEK 400 billion the Debt Office forecasted in May.
The European and Nordic credit markets showed rising credit spreads during the month. Like the stock markets, the credit markets were affected by the US election and increased spread of the Corona virus. Stibor 3-month continued to decline and was noted at - 0.07 percent at the end of the month. The Swedish ten-year government bond showed falling yields and was quoted at -0.07 percent at the end of the month. The yield on Germany's ten-year government bond declined 10 basis points and was quoted at -0.63 percent while the yield on the US ten-year government bond increased 21 basis points and was quoted at 0.88 percent at the end of the month.
Portfolio Manager of Coeli Likviditetsstrategi
Senior Analyst
| Inception Date | 2010-05-01 |
| Management Fee | 0 % |
| Performance Fee | Yes |
| Risk category | 2 of 7 |
DISCLAIMER. The information provided here does not constitute professional financial advice. Past performance is not a guarantee of future returns. The price of the investment may go up or down and an investor may not get back the amount originally invested. The key investor information document (KIID) and prospectus are available at www.coeli.se.